The Personal Savings Allowance is the total amount of interest that you can earn on your savings in a tax year (between 6th April and 5th April) before you need to start paying tax on it. There are different levels of Personal Savings Allowance, depending on your income and the rate of tax you pay.

The savings allowance that you’re entitled to depends on what sort of taxpayer you are.

The column called ‘Personal Savings Allowance’ in the table below shows the amount of interest that you can earn tax-free in a tax year according to your earnings. You can work out your tax band by adding the total amount of interest you earn to all your other income for the year.

The Personal Savings Allowance covers most types of savings interest, such as from bank accounts, trust funds, government bonds and life annuity payments.

ISAs and some National Savings and Investments (NSIs) such as Premium Bonds are already tax free, so they aren’t covered by the Personal Savings Allowance.

You no longer need to do anything to claim your Personal Savings Allowance – it happens automatically.
 

If the interest that you earn on your savings is more than the Personal Savings Allowance, you’ll need to pay tax on the difference. If you work for an employer and pay tax through PAYE, or if you receive a pension, then HMRC will update your tax code and collect the tax that you owe automatically.

If you submit Self Assessment tax returns you can report the savings interest you earn and pay tax on it that way. Just don’t forget that the interest you earn on savings counts towards your overall income – which determines which tax band you fall into!

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